Holy Xlf Batman!!

Discussion in 'Stocks' started by huh, Nov 19, 2008.

  1. huh


    I mostly trade the RUT and IWM but just noticed the XLF trading at $10.56!!! I've been bearish but I gotta say I think I'm getting bullish on XLF. I'm looking at selling the Dec 10/6 put spread. The collected premium is around $107 with a max loss of $293. More importantly seems like buying shares of XLF at $8.93 a share seems like a no-brainer here!

    I don't have much experience with trading XLF so any input on this would be appreciated. Some pros and cons I see:

    Cons: Well its a bunch of financials.

    - Seems cheap at $8.93 a share because downside is only $8.93 and long term upside should be at least to $15 - $20.
    - Its an etf so if it goes to 0 then I've got much worse problems since most of the financial institutions won't exist.
    - Government bailout because I dont' think the government will let the major financials fail so I don't think XLF is going to 0.
    - Current dividend yield at 5.45%, but even assuming the dividend yield gets slashed to 1 or 2% still not bad.
    - Plus another 50% drop will take the value to 5 bucks and you can still write calls for decent amount.

    So I've been buying and selling puts like mad on RUT but XLF looks darn tempting here!!
  2. Started building a long XLF position today. Not messing with options at such high VIX - just buying the underlying and tucking it away.

    It's scary as hell - this could easily drop another 30% next year.
  3. huh


    I agree, I'm doing some research on the XLF holdings right now. I will look to go ahead and start selling this spread on friday when options expire. Reason I'm doing options rather than straight stock is if XLF stays above $10 in dec then I make a 10% return. If XLF does drop another 30% next month and drops to 7 then fine I'll be assigned shares at a total cost of just $8.96.

    Looks like a screaming buy to me, I'm just surprised to see a major sector ETF at this low of a price...:confused:
  4. I have been buying XLF for the past week or so, from as high as 12.80 to 10.63 today. Will add more on further declines. I am seeking 25% or more over the next few weeks. Sounds a lot but XLF will bounce back to 15 or higher during the next bear market rally.

    A patient CALL buyer can start buying JAN calls - Strikes 11 and 12, and if XLF goes as low as 9.50 you can look at the 10 strike. These Call options trades are short term - get out on any quick bounce back to 13 or so.

    Another good candidate - stock or option - is BAC. The higher potential financial stock is JPM. You may consider Dec or Jan calls with strike 30 (or higher)

    Be patient, scale in as the market drops. I don't see SPX going lower than 760/780 in this leg down. Maybe in late January/Febaruar, but not now.
  5. ASav


  6. That's a closed end fund. The yield and discount look ok, but they have, like, 4 months worth of cash on hand based on TTM performance.

    If I missed or misread something, please feel free to correct me.
  7. I bought XLF ( 200 ) at $15.00 thinking it was a good buy that time and now it is at $10.00 thinking of averaging it down with 200 shares more
  8. weld1


    DUMP IT!!!
  9. Closed at 10.52

    I would recommend buying more at these levels or lower.

    Also consider buying BAC at these relatively low prices.

    If C goes to $5 ... buy a few hundred.

    I may buy C tomorrow.
    #10     Nov 19, 2008